Commentary 1
Colao, J. J. (2013). Need A Business Loan? Impress The Algorithm, Not The Loan Officer. Forbes. Retrieved 22 April 2013 from: http://www.forbes.com/sites/jjcolao/2013/03/27/need-a-business-loan-impress-the-algorithm-not-the-loan-officer/.
1. On Deck Capital is an online lender for small businesses. Their business model uses algorithms to determine the small businesses credit worthiness in minutes or hours rather than days, weeks, or months. The company has a reputation for their ‘unorthodox approach to lending’ by quickly addressing the decision for or against the loan and charging ‘steep interest rates’ (Colao, 2013). The interest rates are 18 to 36 percent on 3 to 18 month loans with payments withdrawn daily from the small business customer’s account (Colao, 2013). For a merchant cash advances, the annual rates reach as high as 70%, which they do by collecting a slice of credit-card receipts in return for a lump sum (Colao, 2013).
2. The moral issue is it fair to small businesses to provide loans with large interest rates and daily payments that may cause more problems to their daily cash flow? Further, one could question the long-range benefit of helping the small businesses out of their situations when the interest rates are so high, and payments come out of their accounts daily. The company makes it clear the risk is theirs regarding small-businesses staying in business long enough to repay the loans or to have the cash flow to make payments when due.
3.One can be moral while appearing unfair as is the case here. On Deck Capital presents its terms and business model out front for its investors, customers, and potential customers to view. The company has felt the pressure and panic of having their funding or line of credit taken from them. The small businesses make the decision to apply and accept the loan terms.
Commentary 2
Entrepreneur. (2013). Start It Up, Flying Colors. Entrepreneur, 41 (4): 82.
1. In an interesting coincidence, in the Entrepreneur April magazine, a small article speaks about an art school/center that needed some funds to address the lack of students during the recent recession. The art school’s owners went online to Lendio to find a lender that will spend money on a small business. Lendio has about 1,300 lenders it works with and provides short and long-term loans, fast-cash, peer-to-peer, and merchant cash-advances (Entrepreneur, 2013). The site receives about 10,000 small business owners applying for loans each month with a 60-70% approval rate (Entrepreneur, 2013). The art school received an offer from On Deck Capital for $15,000 but only needed $10,000. The art school took their time to check out On Deck Capital and ended up taking the loan with them.
2. The payment terms were $127 per day for the duration of the 86-day loan. The art school owners believed it was easier to come up with the daily amount rather than a monthly payment of $3,000. The moral concern presented in this article is the basic math that does not make sense. According to the article, “$127 a day” is the payment amount, per week seven days that are $889 or $3,822.70 for a 4.3-week month. On the other hand, if one wanted to apply a 30-day month to the terms, the amount paid back is $3,810 a month.
3. The numbers just do not add up right. How is this benefiting the customer and does the customer realize the difference between what they pay daily and monthly. Granted, this article does not provide the documents of the loan, but the Forbes article states from the company payments made each day, not business day. The art school owner states a day. The numbers may be easier to understand on a daily rate basis, but it does not mean that the amount is easier on the cash flow for all companies.
Commentary 3
Gourdreau, J. (2013). The Cookie Crumbles. Forbes, 191 (5): 42-44.
1. Irene Rosenfeld, Chairman and CEO of Mondelez International has raised some concern about her ethics as well as the company she represents, Kraft Foods(Gourdreau, 2013). Rosenfeld failed to show up in the United Kingdom’s parliament hearings regarding the hostile takeover of Cadbury in 2010 (Gourdreau, 2013). This calls into question if placing emphasis on the cultural expectations of one country onto another is ethical, moral, or just good business practice. According to the article, Rosenfeld has made a number of decisions regarding Kraft Foods, Cadbury, and Mondelez International that have made investors and the public unhappy (Gourdreau, 2013).
2. The moral dilemma appears to be the ability or inability to make everyone happy rather and calling it unethical behavior. One has to question why a company or individual is unethical for not attending a parliament hearing. The article fails to mention if the parliament hearing attendance was mandatory, so was it just rude, or an unwritten expectation she failed to heed. The problem is not a moral issue as much as it is a matter of good business practice.
3. To demonstrate an understanding for the cultural expectations shows respect but failing to do so does indicate disrespect. Her actions failed to show courtesy, but it is not an indication of the moral fiber of Rosenfeld or Kraft Foods. The article had an overtone of judgment on Rosenfeld despite attempts to persuade the reader that Rosenfeld knew what she was doing. Rosenfeld believes that the best is yet to come as the profits will increase when the issues are all cared for properly.
